from the waking-the-wrong-giant dept

John Bennett points us to an article in the NY Times that claims to be about how China is gearing up to be an innovation powerhouse rather than just known for "copying." Of course, the actual focus of the article is about how China is trying to get a lot more patents. In fact, we covered this very issue back in October, highlighting how China has set an "innovation policy" that appears much more focused on getting more patents, rather than increasing innovation. There are, of course, some people who still think that the number of patents is a proxy for innovation, but this claim has been debunked so many times, it's just kind of cute when people still bring it up.

So, could it be that thanks to sustained US pressure on China to "crack down" on infringement, that China has suddenly come to believe that patents equal innovation? Last month, just before some diplomatic meetings between the US and China over trade issues, US officials did their usual misleading grandstanding about how China doesn't do enough to "protect" US intellectual property. And, in response, Chinese officials did their usual song-and-dance about how they're really serious about intellectual property now, and we should stop worrying.

Of course, as we've pointed out, China seems to be much more aggressive with intellectual property lately, but not in the way the US wants. That is, it's been using patent and copyright laws to make life more difficult for foreign companies, specifically US companies. And, in reading through the details of that NY Times article above, it looks like they're planning to do more of the same.

The strategy that's being described (get a TON more patents in China and all around the rest of the world) is not a strategy for innovation. It's a strategy to stop others from innovating. It seems that China may understand patents a hell of a lot better than even officials in the US. And, incredibly, US officials seem to be falling for it. The Chinese must be laughing with glee to hear USPTO director David Kappos naively declare that:

"The leadership in China knows that innovation is its future, the key to higher living standards and long-term growth," Mr. Kappos says. "They are doing everything they can to drive innovation, and China's patent strategy is part of that broader plan."

No, they're not driving innovation. They're seeking out weapons to use against foreign companies, as they've been doing for the past few years. That such an obvious move is totally missed by someone like Kappos suggests the level of ignorance of our own patent officials.

The US has taught China well how patents can be used as a weapon to hinder innovation, and it seems clear that China's latest strategy is to use patents as an economic weapon. It's not about improving innovation at home. The Chinese will continue to copy and ignore patents whenever it wants and whenever it believes it will be helpful to the local economy. But it will seek to stymie innovation around the globe by using patents as monopolies that can set up both tollbooths and huge hurdles for innovation from foreign competitors. And the US is playing right into this strategy by believing that patents, by themselves, are some sort of indicator of innovation and pushing China to "respect" patents even more. It's not hard to see how this is going to backfire badly on the US, including the companies who have urged on this strategy.

Reader Comments

The Chinese have caught on to the way the West does business very well and appear to be not just closing the gap, but quickly surpassing us. My last hope is that somehow Brazil will stay neutral between the US and China and develop into its own economic super-power to offset China in 2030 (give or take a few years).

Re:

Buying baseball bats is often seen as a proxy for activity in a baseball league, but if the bats are bought by a gang of punks or mobsters, it's best to think about other potential uses for which the bats may be employed.

they're not driving innovation. They're seeking out weapons to use against foreign companies, as they've been doing for the past few years. That such an obvious move is totally missed by someone like Kappos suggests the level of ignorance of our own patent officials.

It may also suggest that you aren't entirely aware of everything they are aware of. What you state as fact "They're seeking out weapons" is your opinion only, not a confirmed fact. Perhaps Kappos (being in the position he is in) has a little inside information that you just don't have.

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Perhaps Kappos (being in the position he is in) has a little inside information that you just don't have.

And perhaps, being in the position he is in - he sees the world through a strange pair of "patent office tinted" spectacles.

It is blatantly obvious to everyone that China is using any kind of excuse and cover to hide policies that are designed for the short-medium term tactical benefit of Chinese companies in world markets.

Only this morning I heard a piece about why the Chinese are restricting exports (note exports not production) of rare earth metals (important for many modern hi-tech devices) on so called "environmental grounds". The MSM are calling foul on this one - I think you really need to supply evidence if you believe that their behaviour in regard of patents would be any different.

Re: Re: rare earth elements

Not to mention the fact that they did this after having spent a number of years cornering the market on REEs by allowing for environmental abuses that caused the cost of production in the western world to be cost prohibitive. So, all REE miners closed up shop...

Flash forward to today, and REE stocks are hot. Look at the price action of MCP (doubled its price) over the last month even though they won't have an operational mine for ~1yr.

Re: Re:

I think you really need to supply evidence if you believe that their behaviour in regard of patents would be any different.

What, guilty until proven innocent? on TD? Come on!

My point is that while this may be what China is doing, it is not a fact. Stating it as a fact (as TD has done) isn't truthful. The only place he is careful with his words is using "suggests" when referring to Kappos, probably trying to avoid a lawsuit.

The US is Digging its Own "Grave"

Really there are two parts to this discussion. Not only are we teaching China how to be good patent trolls, but we are giving them the money, through our deficit spending, to acquire our so-called "intellectual property".

Try talking in-depth sometime with Kappos and you will quickly realize he is not the fool you are here portraying him as being.

It hardly comes as a surprise that China, and any other country with a large, low wage workforce, would want to move from a "copy" economy to a "creator" economy. India, of course, is a prime example of another such country.

"Creator" economies, whether persons choose to believe it or not, do, in my view, require, inter alia, a relatively stable and predictable body of law under which investment decisions can be made.

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I would be interested to hear more about this "creator economy/copy economy" concept. I tried to Google it, and the only semi relevant result was this comment on this article. I guess I'd have trouble seeing how China's (or India's even) economy would be described with a word such as copy. Got a link to anything or care to expound?

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"Creator" economies, whether persons choose to believe it or not, do, in my view, require, inter alia, a relatively stable and predictable body of law under which investment decisions can be made.

The Chinese government would re-express that for you as:

"require a strong and stable executive to back investment decisions". The Chinese system is still very authoritarian at many levels - and remember the Chinese government only really cares about one thing - the survival of the Chinese government. Everything else is just a means to an end.
In the 70's they realised (unlike the Soviets) that trying to compete militarily with the west was hopeless unless they could also compete economically. Everything that has happened since is just a part of that plan. You will not persuade me otherwise until the Great Firewall of China is dismantled.

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It hardly comes as a surprise that China, and any other country with a large, low wage workforce, would want to move from a "copy" economy to a "creator" economy. India, of course, is a prime example of another such country

No one argued otherwise. Why make that up?

The point was that the way to do that is not through increasing patents.

"Creator" economies, whether persons choose to believe it or not, do, in my view, require, inter alia, a relatively stable and predictable body of law under which investment decisions can be made.

[citation needed]

By the way, a stable and predictable body of law is not the same thing as "get as many patents as possible."

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""Creator" economies, whether persons choose to believe it or not, do, in my view, require, inter alia, a relatively stable and predictable body of law under which investment decisions can be made."

Once again the concept of a "predictable body of law" is misapplied. In a free market competition should be based on providing the best product for the consumer. The law should not be used to restrict the availability of competitive products. Furthermore, investors should not be protected by the law, it is their responsibility to evaluate the competitive environment and to evaluate their risk.

What is perhaps most absurd concerning the "predictable body of law" for so-called "intellectual property" concerns the quantity of lawsuits. The quantity of lawsuits concerning "infringement" essentially proves that the law is NOT predictable. Furthermore, that the law is subject to capricious subjective interpretation. That hardly meets the definition of "predictable".

Not surprising

I hope this hasn't caught many people by surprise. Having access to 50% ownership of all companies IP via the Chinese Government-mandated JV structure should be worrisome.

At the current speed of technological progress, it's quite possible that within 20 years they will not only have 50% ownership to all of technical knowhow, and 100% of the labor knowhow, but then also demand to push ownership in the JV above 51%, or purchase outstanding stock/ownership in the US business.

In the process, investors will be happy because in effect they will trade in their patriotism for a Mercedes. So everybody's happy. China gets our IP via their JV structure, our jobs because US business cant/wont compete, and in the long term, an ownership and management stake in the US companies, so everybody wins.

If China did not support the US you would be in a new depression

There are, of course, some people who still think that the number of patents is a proxy for innovation, but this claim has been debunked so many times, it's just kind of cute when people still bring it up.

really what are you doing there, you are quoting two unknown people who wrote 'a paper' on it, and based ONLY on that paper you build a whole 'debunked' story based on your own opinion.

The fact that China is thinking to increase innovation, and therefore patents, does in no way stop any other country from doing the same.

So is it 'ok' if you are in America and get patents, but if you invent something somewhere else, then you should not do that, you should leave it up to the US to invent it, after all China is only good for copying right.

What do you want to do with all these patents you want to use, that you do not own ??

Thats right, you want to use them, you want to benefit from it without having to invent, or develop it yourself.

And you dont want any other country developing their own technology, and beating the US at innovation..

So you either do not want to progress technically, and therefore you do not want any other country to progress either, Or you want the US to progress but no one else..

Or do you want everyone to progress, and make all their work available to you for free, saving you from having to do anything at all, except benefit from their efforts.

No one benefits from your efforts, because you are leaching off other's who are capable of innovation, something you are not.

People who can earn money do not defend theft, or bank robbery, its only the people who have no other options resort to theft for personal gains.

You might as well let china develop technology, as recently the US has fallen well behind. Not due to patents, but due to the belief of people like mike, that it is better to just wait for someone else invent it, then steal it..

Re: If China did not support the US you would be in a new depression

Re: If China did not support the US you would be in a new depression

I don't think that there are a lot of ethnocentric Techdirt readers who seriously are against China getting patents because they are against any country beating the US in innovation.

One of their concerns might be that because China is so protectionist that it will use patents to aggressively protect its own industry without regard to competition. You could see how this could be harmful to the market as a whole even though it would be beneficial for China.

I have issue with your dismissal of papers you appear to have not read. If someone has even one piece of well written evidence that they believe proves something then they are entitled to their opinion. Now if you wanted to bring up some counter evidence that addressed the original papers I think you would have a good discussion.

As far as your analogy of people stealing, well it is a bit off IMHO. Maybe for desperate poor people this may be true but it is clear that stealing is often perpetrated by those who already have enough. For instance White Collar crime costs us around $300 billion a year compared to blue collar crime which is about $15 billion a year. You can clearly see that the amount of money stolen increases based upon your social and economic status in US society.

At the end of your post you are blaming Mike and company for the decline of the US. You assert it is their attitude that it is better to steal than to invent on your own. I personally think this is a great way of doings things and has been proven successful throughout history. The only problem is that Mike doesn't support this rather comments about it. I think ideally he would rather seen more cooperation and innovation and just does not see the IP industry as delivering this social promise.

I am still unsure about how FOSS relates to this discussion, but if you care to elaborate I would be interested.

1.5 Trillion USD

The Chinese are serious about innovation. They are spending 1.5 Trillion USD in R+D for 2011 not to mention the investment in education that made their kids number 1 in mathmatics and english in the world.
By settling the standard by which all technology leads they will control all future innovation in every country. By favoring domestic grown technology it will be Chinese companies that build the 100 trillion USD infrastructure of China for the 21st century.
Imagine China playing Microsofts monopoly game and restricting foreign access to developer codes.

Food for thought.

Been thinking about this for a while now. If the new war is a war on innovation between countries. Then isn't it likely that the dissemination of information on all things creative becomes a grey market akin to open source projects and whistle blowing on things like climategate?

stop the shilling

"the number of patents is a proxy for innovation"

It's not about how many you have. It's about what they cover. Large slow corps like to talk about how many patents they have, but the truth is if you check the records they are more often sued for patent infringement than they sue others. Losers like to talk about how many patents they have.

Just so you know, plenty of the patents successfully filed in China are actually already filed in US, and their blatant excuse for the unethical piracy is that the scope of the protection does not include China, thus making it legal. What China is doing is blatantly obvious.

violation of IP and Patents by Chinese companies registered in the USA.

After years of hard working and a lot of money spent ,finally we got patents both in the USA and China .more over , we named the product and paid for getting it as a trade name and registered name.Never the less, Chinese companies who have daughter or sister companies in the USA are making infringement of the patents and do not care less about it as if the Court at the USA has no power of compulsory.What else can we do.....?

Re: violation of IP and Patents by Chinese companies registered in the USA.

You make a great point, even if you follow every rule the Chinese throw down, they will not honor the supposed protections their patent laws offer if you are not Chinese. They are theives and liars and that is a fact I've learned from personal experience - not from a book or an article.

If I had the time, I would start searches on their patents at http://epub.sipo.gov.cn/index.action and cross reference to USA/European patents. I would be amazed if even 5 percent of their "intellectual properties" were legitimate. The only innovation they ever show (aside from building high rises in 19 days) is in new ways to rip-off others and suppress people and punish them when they have an opposing view.

They use the Internet to try to suppress opposing views expressed in other countries. They will hack your computer if they can track negative things you've posted about them. I had it happen. I know, it's unimaginable that I could piss them off har har har. They stopped after a bit of "counter revolutionary insurgence".

In this month's Foreign Affairs magazine, they talk about the Chinese propensity to lash-out at anyone they can't intimidate. They see challenges to communist party authority as dangerous threats. They have a saying "a small spark can start a prairie fire" (yeah, and mass hysteria in the authorities/ruling class too ha ha ha).

Should be interesting to see what they come up with now that the US Navy is outright defying their orders to leave international waters in the South China Sea (SCS). What they won't do is have an open conversation about it. They will bully and threat, but it won't work. What they miss is that if they could offer a single rational reason why they believe they have rights over SCS, it would change opinions - I notice they have not done that once.

As a China watcher, it is impressive that they've improved the quality of language used to make public announcements to English-speaking countries. Now, they can actually articulate lame-ass objections they have in high-minded prose, but they still lie and propagate mumbo jumbo. Now that the Nazis are gone, we only have to contend with Chinese and Russian governments along with Islamic crazies - what a shit world they all create for themselves.